Q&A: Simon Lyons, Head of Ecosystem Engagement, OBIE and Nick Down, Head of Payments, HMRC

The OBIE have worked extensively with Government to support HMRC’s £3 million tender for open banking enabled services. While we had no input into the deliberation process, the contract was subsequently awarded to ecosystem participant Ecospend. OBIE is also supporting HMRC on wider opportunities for using open banking to automate and simplify the calculation and collection of tax, as well as reducing reconciliation risk.

Here, Simon Lyons, Head of Ecosystem Engagement talks to Nick Down, Head of Payments at HMRC: 

• Simon: Just for the readers, can I ask you first of all what is the scale of the operation you head up? We know that UKPLC aka the UK Government, is the biggest business in the land but many will not quite appreciate the numbers and volume of customers and transactions. Can you give a brief overview?.

Nick: Virtually everyone in the UK is a customer of HMRC – either as a taxpayer, as someone who receives financial support payments, or both. We collected £636.7 billion in tax revenues and paid out around £40 billion in benefits and tax credits in 2019-20. That means payments are a crucially important part of what we do.  We need to provide easy to use, secure payments for customers that are cost effective for the nation’s taxpayers. We are very much focussed on becoming a trusted, modern tax and customs department as outlined in government’s 10-year Tax Administration Strategy. It is a big task, but we are making steady progress and are particularly pleased to have gone live in March this year with what we understand is the first open banking payment service implemented by any government globally.

• Simon: You went live with open banking payments for Self-assessment on 24 March 2021. That process took around three months to deliver and complete which is quite staggering when we consider the size of HMRC. What were the key benefits that drove the decision to choose an open banking provider?

Nick: We were looking for ways to make it easier for customers to pay which were good value for public money.  Open Banking gives customers the option to have their payment details prepopulated from their bank account, letting them pay more quickly and reducing the risk of them making a mistake.  Open Banking uses Faster Payment, which is a quick and inexpensive payment method.  Implementing the new system so quickly was a great piece of teamwork between the Open Banking supplier and our digital delivery, payments and commercial teams.

• Simon: What are the internal reactions within HMRC and the wider government ministries to the implementation? Any nuggets you can share?

Nick: There’s been a great deal of interest and universally positive reactions.  Customers like the new service, too – they paid more than £1 million using open banking within two days of go live.

• Simon: OK you went through a process and engaged with a small fintech (Ecospend) I personally think this was the best part of the process. HMRC led the way by choosing a true fintech. It could have been one of a couple, but choosing a new emerging open banking player was so beneficial to open banking adoption. What problems did this present when we think of your legacy procurement process?

Nick: We didn’t set out to engage with a small fintech. We would always promote adoption of Small and Medium Enterprises where appropriate but this was new technology, and therefore unfamiliar territory in terms of who the best providers were likely to be. Our biggest challenge was building requirements for a brand new solution, unprecedented in government; so, with support from OBIE, we explored the market to understand what good should look like. We brought in expert consultants in financial services to support the procurement and set out qualitative measures to provide a good basis for assessment. Some of the best responses were from the smaller fintechs, who were able to meet all of our requirements better than some of the larger businesses.

• Simon: You sit in a key strategic position in HMRC, what were the challenges you faced when considering embracing open banking?

There were two main ones.  The first was doing the groundwork to move where we were a few years ago, with payments being designed as part of each tax regime, and therefore inconsistent and somewhat confusing for customers paying several taxes, to where we are now, with a much more consistent approach to paying HMRC that provides a firm foundation for launching new payment services.  The second was mindset: we knew we need to look outwards and worked hard to understand more about the potential of fintechs and make connections with the innovators in payments. You and your OBIE colleagues were a big part of opening our eyes to the new potential being created in the world of payments, and I’m very grateful for the help you gave us.

• Simon: What has the reaction of your bankers been to the initiative?

Nick: That the new Open Banking payment service as a very good option for our customers

• Simon: HMRC has a very large procurement function, the biggest in the UK. Many of our OBIE ecosystem members really struggle when engaging with them and big corporates. Learning from what HMRC did what advice would you give/or what would you recommend?

Nick: We have a large overall procurement function, made up of smaller specialist teams, such as the team working in financial services procurement. It is actually quite small, so we’re not as impersonal as some of your members might imagine. And we want to engage with Open Banking Ecosystem members as we know they have the expertise and ideas we are looking for to feed our innovation, as well as the required financial accreditation. We would encourage members to scan public noticeboards for any of our Procurement Information Notices and innovation days that we hold – and respond to them! We also make a point of attending industry forums and award ceremonies so they should look out for us there. We’d love to hear from them.

• Simon: The benefits of open banking have been recognised by HMRC by the plan to launch Self assessment, PAYE (early May) followed by CT and VAT. Are there any other plans in place that you can share.

Nick: Throughout the coming year, we will be rolling out the Open Banking service to all our other taxes and regimes that can be paid by bank transfer, as well as looking for ways to improve the ‘payment journey’ (horrible term!) to make it as simple and efficient as possible for our customers.

• Simon: The million dollar question – You are meeting with a large UK plc, they ask “should we use/consider open banking” what would your answer be?

Nick: Take the plunge!  If you have thought about how Open Banking might dovetail with your payment strategy and your customers’ expectations, talk to OBIE about Open Banking.  You won’t regret it.  And if correcting customer payment errors or allocating payments to the right customer account is a significant task for your organisation, you should definitely consider Open Banking which pre-populates payment data with the correct bank account details.